Brandon Wiegand, an executive vice president for Focus Commercial Group, tells a funny story about the struggles of acquiring property in Downtown Las Vegas these days. His client had a half-acre parcel at 11th and Stewart in escrow for about $225,000, but then reconsidered. So Wiegand approached the owner of the adjacent parcel and offered to sell his client’s land for just a smidgen more than $225,000. The potential buyer said the price was way too high.

Wiegand’s client then wondered if the potential buyer would sell his parcel, which is about one-third of an acre. The client thought he might be interested in developing if he could put the two parcels together, but when they approached the property owner, his asking price was $650,000.

In other words, he thought $225,000 for someone else’s half-acre was outrageous, but he was perfectly comfortable asking $650,000 for his own adjacent third of an acre. For Wiegand, this perfectly encapsulates the struggle to develop Downtown. He says some longtime property owners have unrealistic expectations about land values, which in turn is stalling progress.

John Restrepo, a local economic analyst, concurs. “There’s pricing hysteria,” he says. “It’s slowing the development of Downtown, because they’re sitting there with unrealistic expectations of what developers can pay.”

Potential buyers think it’s madness, so some are sitting on their hands. Why the irrational exuberance about Downtown land values? No mystery there. The announcement that Zappos is moving Downtown, coupled with CEO Tony Hsieh’s commitment of $350 million to build a vibrant, urban Downtown, has some property owners sure they are sitting on golden eggs.

Downtown watchers blame an old saw—the media! All the fawning local and national media stories about Hsieh and Downtown have created delusional ideas about what property is really worth. The thinking goes like this: Perhaps the Hsieh-created Downtown Project, which recently acquired the old Ambassador Hotel site and some nearby parcels for $7.9 million, will buy my property.

Likewise, property owners may be thinking that progress will continue Downtown and that land values will rise. Who wants to be the sucker who sold too soon for too little?

This is not a new trend, according to some longtime Downtown observers. First, Main Street Station was going to rejuvenate Downtown. Then, it was the canopy at the Fremont Street Experience. (Hopefully no one believed Neonopolis was going to be Downtown’s savior.) Then there was the Manhattanization of Downtown coinciding with a valleywide property bubble, which sent prices into the stratosphere.

Wiegand says some property owners never quite accepted the reality of the real estate crash. They bought property during the boom, or they saw the value of their property rise astronomically during the boom, and are still in denial about the crash.

Paul Murad, who often represents sellers, disagrees. He says it’s buyers who are in denial. “Buyers have delusions of how bad things are. They think it’s 2009, 2010 or 2011, so they think they can pick up things that are 20, 30, 40 percent of value.”

I talked to a few property owners, several of whom were cagey about their plans, but one representative made clear that they expect top dollar. As he says, “The owner knows the property is situated in a very desirable area. Why sell prematurely when you know the area is exploding?”

But the economics are pretty simple: A developer will only buy land at a given price if he knows he can expect a certain rent once he improves the property. Currently, rents aren’t high enough to justify many of the asking prices.

“You have every right in the world to sit and wait, but you have some of these guys holding out, and they’re asking for numbers that don’t pencil,” Wiegand says, “pencil” being the term for financial feasibility. “At the end of the day, it needs to pencil.”

And until it does, we wait.

J. Patrick Coolican is a columnist for the Las Vegas Sun. Follow him on Twitter @jpcoolican or email him at patrick.coolican@lasvegassun.com. His Neon Eden radio show airs Wednesdays at 7 a.m. on 91.5 FM.